Your tax liability in Illinois is dependent on your marital status. It’s even more important during a high-asset divorce to put tax liability into perspective. One spouse may end up with more assets, and one might leave with less than they initially had. Your financial accountability will shift during and after a divorce.
Change in circumstances
Any time your address or name changes, the IRS requests that you immediately renew your Social Security information. Your tax liability in a high-asset divorce could be higher if you fail to properly report with the IRS. Among the major life changes that influence your taxes, you’ll find your personal income, current address and marital status as key factors.
A spouse’s retirement contributions become separate property after a divorce. An ex-spouse, for example, can’t claim your Social Security or use what you contribute as deductions. Readjust for retirement taxes once your accounts go from joint to separate property in a divorce.
One spouse typically needs to track alimony as a deductible while the other tracks it as taxable income. In a high-asset divorce, only assets that qualify as alimony can be deducted from taxable income. This excludes payments made to a spouse outside of an alimony contract. Keep in mind that alimony is only taxed as income in the year in which it is received.
High-asset divorces in Illinois
From child support to shared insurance policies, the assets that a divorce brings to mind dictate your tax liability. High-asset divorces in Illinois need to be handled with adequate planning. Tax must also be examined in terms of past obligations and current assets, so remember that divorce is when your tax liability should get reassessed.